-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AxSczxk62zZkXlAHLHXm8gWLTCo1PNQiBKHHMj3nmrVt3zcBqfLHLrLZg4GgCZeQ Icx6ccNL0QOmdYQa1vvvGg== 0001005794-03-000141.txt : 20030512 0001005794-03-000141.hdr.sgml : 20030512 20030512162247 ACCESSION NUMBER: 0001005794-03-000141 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOLUNTEER BANCORP INC CENTRAL INDEX KEY: 0000947440 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 621271025 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-22473 FILM NUMBER: 03693022 BUSINESS ADDRESS: STREET 1: 161 W MAIN ST STREET 2: PO BOX 126 CITY: SNEEDVILLE STATE: TN ZIP: 37879 BUSINESS PHONE: 4239219900 MAIL ADDRESS: STREET 1: 161 W MAIN ST STREET 2: PO BOX 126 CITY: SNEEDVILLE STATE: TN ZIP: 37879 10QSB 1 vol10q33103.txt QUARTERLY REPORT ON FORM 10-QSB U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2003 [ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- ----------------- Commission file number 33-94050 VOLUNTEER BANCORP, INC. - -------------------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Tennessee 62-1271025 - -------------------------------------------------------------------------------- (State of other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 210 East Main Street, Rogersville, Tennessee 37879 - -------------------------------------------------------------------------------- (Address of principal executive offices) (423) 272-2200 (Issuer's telephone number) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes X No -- -- APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 539,027 as of May 9, 2003. Transitional Small Business Disclosure Format (check one); Yes No X -- -- VOLUNTEER BANCORP, INC. INDEX Page No. Item 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets March 31, 2003 and 2002 (Unaudited) 3 Condensed Consolidated Statements of Earnings For The Three Months Ended March 31, 2003 and 2002 (Unaudited) 4 Condensed Consolidated Statements of Cash Flows For The Three Months Ended March 31, 2003 and 2002 (Unaudited) 5 Condensed Consolidated Statements of Comprehensive Income For the Three Months Ended March 31, 2003 and 2002 (Unaudited) 6 Notes to Unaudited Condensed Consolidated Financial Statements Three Months Ended March 31, 2003 and 2002 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3. Controls and Procedures 20 PART II. OTHER INFORMATION Item 1. Legal Proceedings 20 Item 2. Changes in Securities 20 Item 3. Defaults upon Senior Securities 20 Item 4. Submission of Matters to a Vote of Securities Holders 20 Item 5. Other Information 20 Item 6. Exhibits and Reports on Form 8-K 20 SIGNATURES 21 CERTIFICATIONS 22 1 PART I - FINANCIAL INFORMATION Item 1. Financial Statements INDEPENDENT AUDITOR'S REVIEW REPORT To the Board of Directors Volunteer Bancorp, Inc. Rogersville, Tennessee We have reviewed the accompanying condensed consolidated balance sheets of Volunteer Bancorp, Inc. and subsidiary as of March 31, 2003 and 2002, and the related condensed consolidated statements of earnings, condensed consolidated statements of cash flows, and condensed consolidated statements of comprehensive income for the three months then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these condensed consolidated financial statements is the representation of the management of Volunteer Bancorp, Inc. A review of interim financial statements consists primarily of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted accounting standards, the objective of which is the expression of an opinion regarding the condensed consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements in order for them to be in conformity with generally accepted accounting principles. /s/ Welch & Associates, Ltd. Welch & Associates, Ltd. Nashville, Tennessee April 17, 2003 2 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Balance Sheets March 31, 2003 and 2002 (Unaudited- See Accountants' Review Report) - --------------------------------------------------------------------------------
ASSETS 2003 2002 ------ ----------- ----------- Cash and due from banks $ 3,971,679 $ 2,932,724 Federal fund sold 4,325,000 5,850,000 -------------------- -------------------- Total cash and cash equivalents 8,296,679 8,782,724 Investment securities available for sale (amortized cost of $27,322,624 and $28,038,407, respectively) 27,717,705 27,737,118 Investment securities held to maturity (estimated market value of $954,833 and $617,255) 941,428 622,683 Loans, less allowances for loan losses of $1,088,528 and $915,601, respectively 68,756,048 69,732,825 Accrued interest receivable 831,477 890,562 Premises and equipment, net 3,761,385 3,815,994 Deferred income taxes 79,047 223,518 Other real estate 1,156,485 1,177,589 Cash value of life insurance 2,009,159 - Goodwill 131,259 131,259 Other assets 223,620 280,714 -------------------- -------------------- Total assets $ 113,904,292 $ 113,394,986 ==================== ==================== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Deposits: Non-interest bearing $ 13,381,870 $ 12,023,699 Interest bearing 89,676,886 91,517,672 -------------------- -------------------- Total deposits 103,058,756 103,541,371 Note payable (note 3) 1,415,000 1,810,000 Interest payable 383,830 574,066 Securities sold under repurchase agreements 1,990,690 1,210,822 Other accrued taxes, expenses and liabilities 170,452 200,164 -------------------- -------------------- Total liabilities 107,018,728 107,336,423 -------------------- -------------------- Stockholders' equity: Common stock, $0.01 par value, 1,000,000 shares authorized, 539,027 shares issued and outstanding 5,390 5,390 Additional paid-in capital 1,916,500 1,916,500 Retained earnings 4,718,724 4,323,472 Accumulated other comprehensive income 244,950 (186,799) -------------------- -------------------- Total stockholders' equity 6,885,564 6,058,563 -------------------- -------------------- Total liabilities and stockholders' equity $ 113,904,292 $ 113,394,986 ==================== ====================
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Statements of Earnings For The Three Months Ended March 31, 2003 and 2002 - -------------------------------------------------------------------------------- (Unaudited - See Accountants' Review Report)
2003 2002 ---------- ---------- Interest Income: Interest and fees on loans $ 1,241,197 $ 1,485,562 Interest on federal funds 11,659 22,102 Interest on investment securities: Taxable 232,550 278,311 Exempt from Federal income taxes 71,585 43,537 -------------------- -------------------- Total interest income 1,556,991 1,829,512 -------------------- -------------------- Interest Expense: Interest on deposits 444,243 690,024 Other borrowed funds 25,779 31,594 -------------------- -------------------- Total interest expense 470,022 721,618 -------------------- -------------------- Net interest income 1,086,969 1,107,894 Provision for possible loan losses 100,000 90,000 -------------------- -------------------- Net interest income after provision for possible loan losses 986,969 1,017,894 -------------------- -------------------- Non-interest income: Service charges on deposits 107,447 38,985 Other service charges and fees 2,703 7,476 Securities gains 106,466 34,242 Other non-interest income 36,368 24,775 -------------------- -------------------- Total non-interest income 252,984 105,478 -------------------- -------------------- Non-interest expense: Salaries and employee benefits 504,624 439,087 Occupancy expense 70,597 69,963 Furniture and equipment expense 96,626 101,854 Other non-interest expense 341,495 283,271 -------------------- -------------------- Total non-interest expense 1,013,342 894,175 -------------------- -------------------- Income before income taxes 226,611 229,197 Income tax expense 65,079 76,340 -------------------- -------------------- Net income $ 161,532 $ 152,857 ==================== ==================== Income per common share $ 0.30 $ 0.28 ==================== ==================== Common shares outstanding 539,027 539,027 ==================== ====================
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Statements of Cash Flows For The Three Months Ended March 31, 2003 and 2002 (Unaudited - See Accountants' Review Report) - --------------------------------------------------------------------------------
2003 2002 ---------- ---------- Cash Flows from Operating Activities: Net income $ 161,532 $ 152,857 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income taxes 23,463 (3,127) Provision for possible loan losses 100,000 90,000 Provision for depreciation 48,563 54,679 FHLB stock dividends (3,600) (3,900) (Gain) on securities (106,466) (34,242) Decrease in interest receivable 104,139 175,917 Decrease (increase) other assets 103,008 (44,711) Increase (decrease) in other liabilities 73,050 (152,583) --------------------- --------------------- Net cash provided (used) by operating activities 503,689 234,890 --------------------- --------------------- Cash Flows from Investing Activities: Purchase life insurance policies (2,000,000) - Proceeds from calls and maturity of held to maturity securities 111,563 4,176 Purchase of investment securities available for sale (10,232,562) (5,969,841) Proceeds from calls and maturity of investments available for sale 4,308,838 1,000,000 Proceeds from sale of investments available for sale 5,904,082 2,960,272 Net (increase) decrease in loans (1,841,066) 2,335,331 Capital expenditures (21,277) (4,315) --------------------- --------------------- Net cash provided (used) in investing activities (3,770,422) 325,623 --------------------- --------------------- Cash Flows from Financing Activities: Net increase in demand deposits, NOW accounts, IRA and savings accounts 3,636,886 3,557,616 Net (decrease) in certificates of deposit (535,887) (3,925,900) Repayment of note payable (395,000) (360,000) Net (decrease) increase in securities sold under repurchase agreements (298,094) 101,219 Dividends paid - (53,903) --------------------- --------------------- Net cash (used) provided by financing activities 2,407,905 (680,968) --------------------- --------------------- (Decrease) in cash and cash equivalents (858,828) (120,455) Cash and cash equivalents beginning of period 9,155,507 8,903,179 --------------------- --------------------- Cash and cash equivalents end of period $ 8,296,679 $ 8,782,724 ===================== ===================== Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest $ 497,514 $ 1,041,899 ===================== ===================== Income taxes $ 21,454 $ 31,776 ===================== =====================
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Condensed Consolidated Statements of Comprehensive Income For The Three Months Ended March 31, 2003 and 2002 (Unaudited - See Accountants' Review Report) - --------------------------------------------------------------------------------
2003 2002 ----------- ----------- Net income $ 161,532 $ 152,857 -------------------- ------------------- Other comprehensive income (loss), before tax: Unrealized (loss) on securities available for sale: Unrealized holding (losses) arising during the period (71,292) (311,757) Less: reclassification adjustment for (gains) included in net income (106,466) (34,242) -------------------- ------------------- Other comprehensive (loss) income (177,758) (345,999) Income taxes related to other comprehensive (loss) income (67,548) (105,456) -------------------- ------------------- Other comprehensive (loss), net of tax (110,210) (240,543) -------------------- ------------------- Total comprehensive (loss) income $ 51,322 $ (87,686) ==================== ===================
The accompanying notes are an integral part of these condensed consolidated financial statements. 6 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Notes to Unaudited Condensed Consolidated Financial Statements Three Months Ended March, 2003 and 2002 - -------------------------------------------------------------------------------- 1. Management Opinion In the opinion of management, the accompanying unaudited condensed consolidated financial statements of Volunteer Bancorp, Inc. (the "Company") contain all adjustments, consisting of only normal, recurring adjustments, necessary to fairly present the financial results for the interim periods presented. The results of operations for any interim period is not necessarily indicative of the results to be expected for an entire year. These interim financial statements should be read in conjunction with the annual financial statements and notes thereto. 2. Adoption of Recently Issued Statements of Financial Accounting Standards (SFAS) SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities", is effective for transfers and servicing of financial assets and extinguishment of liabilities occurring after March 31, 2001. This Statement is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15, 2000. This statement replaces SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguisments of Liabilities". It revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of SFAS No. 125's provisions without reconsideration. This Statement provides accounting and reporting standards for transfers and servicing of financial assets and extinguishment of liabilities. Those standards are based on consistent application of a financial-components approach that focuses on control. Under the approach, after a transfer of financial assets, an entity recognizes the financial and servicing assets it controls and the liabilities it has incurred, derecognizes financial assets when control has been surrendered, and derecognizes liabilities when extinguished. This Statement provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The adoption of the provisions of this Statement did not have any material impact upon the financial position or results of operation of the Company. SFAS No. 142, "Goodwill and Other Intangible Assets", is effective for fiscal years beginning after December 15, 2001. This statement addresses financial accounting and reporting for acquired goodwill and other intangible assets and supercedes APB Opinion No. 17, "Intangible Assets". It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. This Statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. Under this Statement, goodwill and intangible assets that have indefinite useful lives will not be amortized but rather will be tested at least annually for impairment. Intangible assets that have finite useful lives will continue to be amortized over their useful lives, but without the constraint of an arbitrary ceiling. This Statement provides specific guidance for testing goodwill for impairment. The adoption of the provisions of this Statement did have any material impact upon the financial position or results of operation of the Company. 7 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Notes to Unaudited Condensed Consolidated Financial Statements Three Months Ended March, 2003 and 2002 - -------------------------------------------------------------------------------- SFAS No. 147, "Acquisitions of Certain Financial Institutions - an Amendment of SFAS No. 72 and No. 144 and FASB Interpretation No. 9." SFAS No. 72, "Accounting for Certain Acquisitions of Banking or Thrift Institutions, and FASB Interpretation No. 9, "Applying APB Opinions No. 16 and 17 When a Savings and Loan Association or a Similar Institution is Acquired in a Business Combination Accounted for by the Purchase Method", provided interpretive guidance on the application of the purchase method to acquisitions of financial institutions. Except for transactions between two or more mutual enterprises, this Statement removes acquisitions of financial institutions from the scope of both Statement No. 72 and Interpretation No. 9 and requires that those transactions be accounted for in accordance with SFAS Statements No. 141, "Business Combinations", and No. 142, "Goodwill and Other Intangible Assets". Thus, the requirement in paragraph 5 of Statement No. 72 to recognize (and subsequently amortize) any excess of the fair value liabilities assumed over the fair value of tangible and identifiable intangible assets acquired as an unidentifiable intangible asset no longer applies to the acquisitions within the scope of this Statement. In addition, this statement amends SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", to include in its scope long-term customer-relationship intangible assets of a financial institutions such as depositor-and borrower-relationship intangible assets and credit card holder intangible assets. Consequently, those intangible assets are subject to the same undiscounted cash flow recoverability test and impairment loss recognition and measurement provisions that Statement No. 144 requires for other long-lived assets that are held and used. Paragraph 5 of this Statement, which relates to the application of the purchase method of accounting, is effective for acquisitions for which the date of acquisition is on or after October 1, 2002. The provisions in paragraph 6 related to accounting for the impairment or disposal of certain long-term customer-relationship intangible assets are effective on October 1, 2002. Transition provisions for previously recognized unidentifiable intangible assets in paragraphs 8 - 14 are effective on October 1, 2002, with earlier application permitted. The adoption of the provisions of this Statement did have any material impact upon the financial position or results of operation of the Company. SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an Amendment of SFAS No. 123". This Statement amends SFAS No. 123, "Accounting for Stock-Based Compensation", to provide for alternative methods of transition for a voluntary change of the fair value based method of accounting for sock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stack-based employee compensation and the effect of the method use on the reported results. This Statement permits tow additional transition methods for entities that adopt the preferable method of accounting for stock-based employee compensation. Both of those methods avoid the ramp-up effect arising from prospective application of the fair value based method. In addition, to address concerns raised by some constituents about the lack of comparability caused by multiple transition methods, this Statement does not permit the use of the original Statement No. 123 prospective method of transition for changes to the fair value based method made in fiscal years beginning after December 15, 2003. The adoption of the provisions of this Statement did have any material impact upon the financial position or results of operation of the Company. 8 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Notes to Unaudited Condensed Consolidated Financial Statements Three Months Ended March, 2003 and 2002 - -------------------------------------------------------------------------------- SFAS No. 149, "Accounting for Certain Financial Instruments with Characteristics of Liabilities and Equity" is expected to be issued in the first quarter of 2003. This Statement establishes standards for issuers' classification as liabilities in the statement of financial position of the following financial instruments that have characteristics of both liabilities and equity: (a) Financial instruments that are mandatorily redeemable on a fixed or determinable date or upon an event certain to occur even if the instrument is in the form of equity shares. (b) Financial instruments embodying, or indexed to, an obligation to repurchase an issuers' equity shares that requires or could require settlement by transfer of assets shall be classified as a liability (or in some circumstances as an asset). Examples include written put options or forward purchase contracts that are physically settled or net cash settled. (C)) Financial instruments embodying an obligation that the issuer must or could settle by issuing a variable number of its equity shares shall be classified as a liability if the monetary value of the obligation is based solely or predominately on (a) a fixed monetary amount known at inception, (b) variations in something other than the fair value of the issuers' equity shares, or (C)) variations in the fair value of the issuers' equity shares, but in the direction opposite to those variations. Examples include, but are not limited to, a payable settleable with a variable number of issuer shares, a financial instrument indexed to the S&P 500 and settleable with a variable number of issuer shares, and a written put option that could be net share settled. This Statement will be effective for all contracts created or modified after the date the Statement is issued and otherwise effective at the beginning of the first interim period beginning after June 15, 2003. It will be effected by reporting the cumulative effect of a change in accounting principle for contracts created before the issuance date and still existing at the beginning of that interim period. For nonpublic companies, mandatory redeemable financial instruments have special presentation requirements and are subject to the provisions of this Statement for the first fiscal period beginning after December 15, 2003. The adoption of the provisions of this Statement is not anticipated to have any material impact upon the financial position or results of operation of the Company. 3. Note payable The Company's long-term debt consists of a single note payable in the amount of $1,415,000 and $1,810,000 at March 31. 2003 and 2002, respectively, due an unaffiliated national bank. Currently, the interest rate on the note adjusts quarterly and is equal to the three-months London Interbank Offered Rate (Three Month LIBOR) plus 1.95% per annum or at the option of the Company, the rate on the note is equal to the lender's index rate as such rate changes from time to time. The Company may change interest rate options at any time with prior notice to the lender. Interest is payable quarterly. At March 31. 2003 the rate on the note was 3.3% per annum. Principal, unless accelerated, is payable annually on January 31, as follows: January 31, Principal Due ----------- ------------- 2004 435,000 2005 470,000 2006 (Final Maturity) 510,000 ---------------------- $ 1,415,000 ====================== 9 VOLUNTEER BANCORP, INC. AND SUBSIDIARY Notes to Unaudited Condensed Consolidated Financial Statements Three Months Ended March, 2003 and 2002 - -------------------------------------------------------------------------------- The Company owns 100% of the stock of Citizens Bank of East Tennessee all of which has been pledged to the lender to secure the note payable. The Company is in violation of certain loan covenants with respect to this loan in that annualized earnings to tangible assets are less than the 0.75% required and the ratio of nonperforming assets is greater than 2.5%. These violations have not been waived by the lender. Because of these violations, the lender may, at its option, by notice to the Company declare the note in default. In such an event the Company would have ten days to remedy compliance with all loan covenants. If the Company did not or could not comply with all loan covenants within such ten day period the note would be in default. In such a case the lender may declare the note immediately due and payable and among other things proceed to foreclose upon 100% of the stock of Citizens Bank of East Tennessee which is pledged as security for the note. The lender has been notified by the Company of its non-compliance with certain covenants of the note that could lead to the lender declaring the note in default. However, the lender has not notified the Company that it is in default under the terms of the loan agreement. The Company has previously notified the lender of the Company's violation of the loan covenants set forth above. The lender has not yet notified the Company that the loan is in default. If notified, the Company anticipates the lender to first pursue remedies other than foreclosure. Accordingly, the Company expects that the note will be restructured resulting in, among other things, increasing the interest rate on the note and substantially reducing the final maturity date on the note. In such a case, there can be no assurance that the Company could satisfy the restructured debt without obtaining new financing from other lenders or funds from a stock offering. Further, there can be no assurance that a stock offering by the Company would be successful or that new lenders would provide funds to the Company. 4. Contingencies During the course of business, the Company makes various commitments and incurs certain contingent liabilities that are not presented in the accompanying balance sheet. The commitments and contingent liabilities may include various guarantees, commitments to extend credit, standby letters of credit, and litigation. In the opinion of management, no material adverse effect on the financial position, liquidity or operating results of the Company and its subsidiary is anticipated as a result of these items. 5. Certain Regulatory Matters As a result of certain findings in the Tennessee Department of Financial Institution's Report of Examination dated June 4, 2001, the Board of Directors of the Bank entered into a Memorandum of Understanding (Memorandum), dated August 16, 2001, with the Commissioner of the Tennessee Department of Financial Institutions and the Memphis Regional Director of the Federal Deposit Insurance Corporation. A Memorandum of Understanding is an informal administrative tool for institutions that have some weaknesses that if not properly addressed and corrected could lead to supervisory concern requiring formal administrative action. The areas addressed in the Memorandum cover capital adequacy, laws and regulations, data processing audit and review, investment policy maturity strategies, adequate documentation of each of the foregoing but primarily credit administration. As a result, the Board has reviewed a number of the Bank's policies and procedures including its loan policy and has incorporated recommendations designed to strengthen credit quality and the Bank's review procedures regarding loan loss reserve adequacy. Management of the Company and the Bank believe that the Bank is in substantial compliance with the provisions of the Memorandum. 10 VOLUNTEER BANCORP, INC. AND SUBSIDIARY FINANCIAL HIGHLIGHTS As of And For The Three Months Ended March 31, 2003 and 2002 (Unaudited)
2003 2002 ------------ ------------ Net earnings $ 161,532 $ 152,857 Per common share data: Net earnings per common share $ 0.30 $ 0.28 Book value $ 12.77 $ 11.24 Ratio: Return on average assets 0.58% 0.54% Return on average common equity 9.42% 10.03% Net interest margin (taxable equivalent basis) 4.37% 4.31% Expense ratio 3.61% 3.14% Allowance for loan losses/loans 1.56% 1.29% Non-performing loans/loans 3.03% 3.72% Non-performing assets/loans and foreclosed properties 4.61% 5.30% Shareholders' equity/total assets 6.05% 5.34% Leverage ratio (tangible capital/tangible assets) 5.80% 5.38%
11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations As Of and for the Three Months Ended March 31, 2003 and 2002 - ------------------------------------------------------------ The following provides a narrative discussion and analysis of significant changes in the results of operations and financial condition of Volunteer Bancorp, Inc. (the "Company"). This discussion should be read in conjunction with the consolidated financial statements and related financial analysis set forth in the Company's 2002 Annual Report, the interim unaudited consolidated financial statements and notes for the three months ended March 31, 2003, included elsewhere herein, and the supplemental financial data included herein. CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING INFORMATION This discussion contains certain forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995). Such statements are based on management's expectations as well as certain assumptions made by, and information available to, management. Specifically, this discussion contains forward-looking statements with respect to the following items: - effects of projected changes in interest rates, - effects of changes in the securities markets, - effects of changes in general economic conditions, - the adequacy of the allowance for losses on loans and the level of future provisions for losses on loans, and - business plans for the year 2003 and beyond including underwriting criteria. When used in this discussion, the words "anticipate," "project," "expect," "believe," "should" and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve significant risks and uncertainties including changes in general economic and financial market conditions, changes in banking laws and regulations, and the Company's ability to execute its business plans. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, actual results could differ materially. SUMMARY The Company reported net income for the first quarter of 2003 of $161,532, or $0.30 per common share, compared to net income of $152,857, or $0.28 for the same period a year ago. Our returns on average assets and average common equity were 0.58% and 9.42%, respectively, for the quarter compared to 0.54% and 10.03% for the same period last year. FINANCIAL CONDITION Earning Assets. Average earning assets for the three months ended March 31, 2003 totaled $103,712,000 which represents 92.35% of average total assets. Earning assets totaled $103,749,000 at March 31, 2003. Average earning assets for the three months ended March 31, 2002 totaled $104,920,000, which represents 92.23% of average total assets. Earning assets totaled $103,943,000 at March 31, 2002. Loan Portfolio. The Company's average loans for the three months ended March 31, 2003 were $68,705,000 and for the three months ended March 31, 2002 were $71,626,000. The balance in total loans at March 31, 2003 was $69,845,000 and at March 31, 2002 was $70,648,000. Investment Portfolio. The Company's investment securities portfolio averaged $30,152,000 for the three months ended March 31, 2003 and $27,469,000 for the three month ended March 31, 2002. The portfolio totaled $28,659,000 at March 31, 2003 and $28,360,000 at March 31, 2002. 12 The Company maintains an investment strategy of seeking portfolio yields within acceptable risk levels, as well as providing liquidity. The Company maintains two classifications of investment securities: "Available for Sale" and "Held to Maturity." The Available for Sale securities are carried at fair market value, whereas the Held to Maturity securities are carried at amortized cost. At March 31, 2003 there was a net unrealized gain in the Available for Sale securities of $395,081 and there was a net unrealized loss of $301,289 at March 31, 2002. Cash Value of Life Insurance. During the first quarter of 2003, the Company invested in Bank owned life insurance. The average balance of the cash surrender value of the life insurance polices was $711,000 for the three months ended March 31, 2003. The cash surrender value totaled $2,009,000 at March 31, 2003. Deposits. The Company's average deposits were $103,539,000 for the three months ended March 31, 2003. This included average non-interest bearing deposits of $12,596,000, average certificates of deposit of $60,317,000, average savings deposits of $7,365,000 and average interest bearing transaction accounts of $23,261,000. The Company's average deposits for the three months ended March 31, 2002 were $103,589,000. This included average non-interest bearing deposits of $11,807,000, average certificates of deposit of $65,876,000, average savings deposits of $6,725,000 and average interest bearing transaction accounts of $19,181,000. Deposits at March 31, 2003 totaled $103,059,000 and totaled $103,541,000 at March 31, 2002. Securities Sold Under Repurchase Agreements. The Company's average balance of securities sold under repurchase agreements for the three months ended March 31, 2003 was $2,132,000 and the average was $1,161,000 for the three months ended March 31, 2002. The total outstanding under these agreements at March 31, 2003 was $1,991,000 and the total outstanding at March 31, 2002 was $1,211,000. Note Payable. The Company's note payable consists of a single note payable in the amount of $1,415,000 due an unaffiliated national bank. The interest rate on the note adjusts quarterly and is equal to the three-months London Interbank Offered Rate (Three Month LIBOR) plus 1.95% per annum or at the option of the Company the rate on the note is equal to the lender's index rate as such rate changes from time to time. The Company may change interest rate options at any time with prior notice to the lender. Interest is payable quarterly. At March 31, 2003 the rate on the note was 3.3% per annum. Principal is payable annually commencing January 31, 1996 and each January 31 thereafter. Interest expense for the three months ended March 31, 2003 totaled $14,000. The loan is secured by all of the stock of Citizens Bank of East Tennessee owned by the Company. The Company is in violation of certain loan covenants with respect to this loan in that annualized earnings to tangible assets are less than required and the ratio of nonperforming assets is greater than 2.5%. These violations have not been waived by the lender. Because of these violations, the lender may, at its option, by notice to the Company declare the note in default. In such an event the Company would have ten days to remedy compliance with all loan covenants. If the Company did not or could not comply with all loan covenants within such ten day period the note would be in default. In such a case the lender may declare the note immediately due and payable and among other things proceed to foreclose upon 100% of the stock of Citizens Bank of East Tennessee which is pledged as security for the note. 13 The Company has previously notified the lender of the Company's violation of the loan covenants set forth above that could lead to the lender declaring the note in default. The lender has not yet notified the Company that the loan is in default under the terms of the loan agreement. If notified, the Company anticipates the lender to first pursue remedies other than foreclosure. Accordingly, the Company expects that the note will be restructured resulting in, among other things, increasing the interest rate on the note and substantially reducing the final maturity date on the note. In such a case, there can be no assurance that the Company could satisfy the restructured debt without obtaining new financing from other lenders or funds from a stock offering. Further, there can be no assurance that a stock offering by the Company would be successful or that new lenders would provide funds to the Company. Capital Resources. Shareholder's equity totaled $6,885,564 as of March 31, 2003. This included $5,390 of common stock, $1,916,500 of additional paid-in capital, $4,718,724 of retained earnings and accumulated other comprehensive income consisting of an unrealized gain on Securities Available for Sale, net of deferred taxes, of $244,950. BALANCE SHEET MANAGEMENT Liquidity Management. Liquidity is the ability of a company to convert assets into cash without significant loss and to raise funds by increasing liabilities. Liquidity management involves having the ability to meet day-to-day cash flow requirements of its customers, whether they are depositors wishing to withdraw funds or borrowers requiring funds to meet their credit needs. The primary function of asset/liability management is not only to assure adequate liquidity in order for the Company to meet the needs of its customer base, but to maintain an appropriate balance between interest-sensitive assets and interest-sensitive liabilities so that the Company can profitably deploy its assets. Both assets and liabilities are considered sources of liquidity funding and both are, therefore, monitored on a daily basis. The asset portion of the balance sheet provides liquidity primarily through investments in federal funds and maturities of investment securities. Additional sources of liquidity are loan repayments and possible prepayments from the mortgage backed securities in the investment portfolio. At March 31, 2003 and 2002, the Company had investments in federal funds of $4,325,000 and $5,850,000, respectively. The liability portion of the balance sheet provides liquidity through various interest bearing and non-interest bearing deposit accounts. Additional sources of liquidity are Federal Home Loan Bank Advances, federal funds purchased, and securities sold under repurchase agreements. The Company has an agreement with the Federal Home Loan Bank whereby the Company may borrower up to an amount, $6,000,000 at March 31, 2003, established by the Federal Home Loan Bank. 14 The Company is required to maintain eligible collateral, consisting of first mortgages on one-to-four family residential properties, representing 150 percent of the current outstanding balance of all advances. There were no advances outstanding at March 31, 2003 and 2002. At March 31, 2003, the Company had $2,500,000 of federal funds purchase lines available at three correspondent banks. There were no federal funds purchased at March 31, 2003 and 2002. The Company has agreements with customers, who must meet certain criteria established by the Company, whereby the Company sells the customer investment securities under agreements to repurchase the securities. The securities underlying the agreements are maintained under the Company's control. The outstanding balance under these agreements was $1,991,000 and $1,211,000 at March 31, 2003 and 2002, respectively. Additional capital funds or long-term debt are anticipated to be necessary during the next twelve to eighteen months. There is no assurance that additional capital funds or other long-term debt can be obtained under current market conditions. The additional funds required are approximately $1,415,000 or the amount necessary to replace the Company's current note payable if earnings are not sufficient to permit the Bank to pay dividends in an amount to allow the Company to service its debt. The Bank must also consider its overall capital position in determining the amount of dividends that can be paid to the Company. Thus after any dividend payment, the Bank must still satisfy all regulatory capital requirements which may otherwise limit the amount of dividends the Bank can pay. If the Company is able to obtain new debt funding, the Company anticipates that the terms would be less favorable than exist under the Company's current note payable. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002 Net Interest Income. Net interest income is the principal component of a financial institution's income stream and represents the spread between interest and fee income generated from earning assets and the interest expense incurred on interest bearing deposits and other borrowed funds. The following discussion is based on a fully taxable equivalent basis. Net interest income for the three months ended March 31, 2003 totaled $1,087,000. This was a result of interest income of $1,557,000 and interest expense of $470,000. Interest and fee income on loans totaled $1,241,000, interest income on the investment portfolio totaled $304,000, and interest income on federal funds sold totaled $12,000. Interest expense included $388,000 on certificates of deposit, $47,000 on interest bearing transaction accounts, $9,000 on savings accounts, $12,000 on securities sold under repurchase agreements, and $14,000 on the note payable. 15 Net interest income for the three months ended March 31, 2002 totaled $1,108,000. This was a result of interest income of $1,830,000 and interest expense of $722,000. Interest and fee income on loans totaled $1,486,000, interest income on the investment portfolio totaled $322,000, and interest income on federal funds sold totaled $22,000. Interest expense included $598,000 on certificates of deposit, $64,000 on interest bearing transaction accounts, $29,000 on savings accounts, $12,000 on securities sold under repurchase agreements, and $19,000 on the note payable. The trend in net interest income is commonly evaluated in terms of average rates using the net interest margin and the interest rate spread. The net interest margin, or the net yield on earning assets, is computed by dividing fully taxable equivalent net interest income by average earning assets. This ratio represents the difference between the average yield on average earning assets and the average rate incurred for all funds used to support those earning assets. The net interest margin for the three months ended March 31, 2003 was 4.37%. The net cost of funds, defined as interest expense divided by average earning assets was 1.81% and the yield on earning assets was 6.18% for the three months ended March 31, 2003. The net interest margin for the three months ended March 31, 2002 was 4.31%. The net cost of funds for the three months ended March 31, 2002 was 2.75% and the yield on earning assets was 7.06%. The interest rate spread measures the difference between the average yield on earning assets and the average rate incurred on interest bearing sources of funds. The interest rate spread eliminates the impact of non-interest bearing funds and gives a direct perspective on the effect of market interest rate movements. During recent years, the net interest rate margins and interest rate spreads have been under intense pressure to maintain historical levels, due in part to tax laws that discourage investment in tax-exempt securities and intense competition for funds with non-bank institutions. The interest rate spread for the three months ended March 31, 2003 was 4.15% and it was 4.02% for the three months ended March 31, 2002. Allowance for Possible Loan Losses. Lending officers are responsible for the ongoing review and administration of each loan. They make the initial identification of loans that present some difficulty in collection or where there is an indication that the probability of loss exists. Lending officers are responsible for the collection effort on a delinquent loan. Senior management is informed of the status of delinquent and problem loans on a weekly basis. 16 Senior management makes recommendations monthly to the board of directors as to charge-offs. Senior management reviews the allowance for possible loan losses on a monthly basis. The Company's policy is to discontinue interest accrual when payment of principal and interest is 90 days or more in arrears, unless there is sufficient collateral to justify continued accrual. The allowance for possible losses represents management's assessment of the risks associated with extending credit and its evaluation of the quality of the loan portfolio. Management analyzes the loan portfolio to determine the adequacy of the allowance for possible loan losses and the appropriate provisions required to maintain a level considered adequate to absorb anticipated loan losses. The provision for possible loan losses was $100,000 for the three months ended March 31, 2003. In assessing the adequacy of the allowance, management reviews the size, quality and risk of loans in the portfolio. Management also considers such factors as loan loss experience, the amount of past due and non-performing loans, specific known risk, the status and amount of non-performing assets, underlying collateral values securing loans, current and anticipated economic conditions and other factors which affect the allowance for possible loan losses. While it is the Company's policy to charge off in the current period the loans in which a loss is considered probable, there are additional risks of future losses that cannot be quantified precisely or attributed to particular loans or classes of loans. Because these risks include the state of the economy, management's judgement as to the adequacy of the allowance is necessarily approximate and imprecise. The allowance for loan losses at March 31, 2003 was 1.56% of loans and approximately 33% of non-performing assets. Management believes that the $1,089,000 at March 31, 2003 in the allowance for possible loan losses is adequate to absorb known risks in the portfolio. No assurance can be given, however, that adverse economic circumstances will not result in increased losses in the loan portfolio, and require greater provisions for possible loan losses in the future. Non-Performing Assets. Non-performing assets include non-performing loans and foreclosed real estate held for sale. Non-performing loans include loans classified as non-accrual and loans past due more than 90 days and still accruing interest. Non-performing assets at March 31, 2003 were $3,276,000, or 4.61% of loans and foreclosed properties. Non-performing assets at March 31, 2003 consisted of non-accrual loans of $1,591,000, loans past due 90 days and still accruing interest of $529,000 and foreclosed real estate of $1,156,000. Non-performing assets at March 31, 2002 were $3,804,000, or 5.30% of loans and foreclosed 17 assets. Non-performing assets at March 31, 2002 consisted of non-accrual loans of $622,000 loans past due 90 days and still accruing interest of $2,005,000 and foreclosed real estate of $1,177,000. The balance in non-performing assets is primarily attributable to commercial real estate and real estate construction loans in which management does not anticipate incurring material losses. Senior management has strengthened the underwriting criteria for real estate construction and commercial real estate lending in order to decrease the risk associated with these types of loans. In addition, in February, 2002, the Company hired an experienced senior credit officer to oversee credit administration, including policies and procedures, underwriting, and credit analysis. Non-Interest Income. Non-interest income consists of revenues generated from a broad range of financial services and activities including fee-based services and securities gains and losses. Total non-interest income was $253,000 for the three months ended March 31, 2003. This included $107,000 from service charges on deposit accounts, $3,000 from other service charges and fees, $106,000 of securities gains, and $37,000 of other non-interest income. Total non-interest income for the three months ended March 31, 2002 was $105,000. This included $39,000 from service charges on deposit accounts, $7,000 from other service charges and fees, $34,000 of securities gains, and $25,000 of other non-interest income. The increase in total non-interest income is mainly attributable to an increase in service charges on deposits and securities gains. Non-Interest Expense. Non-interest expense for the three months ended March 31, 2003 was $1,013,000. This consisted of $505,000 of salaries and employee benefits, $71,000 of occupancy expenses, $97,000 of furniture and equipment expense, and $341,000 of other non-interest expenses. Other non-interest expenses include advertising, supplies and printing, telephone, postage, and legal and accounting fees. Non-interest expenses for the first quarter of 2003 increased $118,000 compared to the first quarter of 2003 primarily for costs associated with increased staffing. Non-interest expense for the three months ended March 31, 2002 was $894,000. This consisted of $439,000 of salaries and employee benefits, $70,000 of occupancy expenses, $102,000 of furniture and equipment expense, and $283,000 of other non-interest expenses. Income Taxes. For the three months ended March 31, 2003, the Company incurred income tax expense of $65,000. For the three months ended March 31, 2002, the Company incurred income tax expense of $76,000. Approximately $72,000 of income earned for the three months 18 ended March 31, 2003 is exempt from federal income taxes. Approximately $44,000 of the income earned during the three months ended March 31, 2002 is exempt from federal income taxes. RETURN ON ASSETS AND EQUITY Return on assets (annualized net income divided by average total assets) for the three months ended March 31, 2003 was 0.58%. Return on assets for the three months ended March 31, 2002 was 0.54%. Return on equity (annualized net income divided by average equity) for the three months ended March 31, 2003 was 9.42% and it was 10.03% for the three months ended March 31, 2002. Equity to assets (average equity divided by average total assets) was 6.05% for the three months ended March 31, 2003 and it was 5.36% for the three months ended March 31, 2002. The dividend payout ratio (dividends declared divided by net income) for the three months ended March 31, 2002 was 70.61%. There were no dividends declared for the three months ended March 31, 2003. EFFECTS OF INFLATION AND CHANGING PRICES Inflation generally increases the cost of funds and operating overhead and to the extent loans and other assets bear variable rates, the yields on such assets. Unlike most industrial companies, virtually all the assets and liabilities of a financial institution are monetary in nature. As a result, interest rates generally have a more significant impact on the performance of a financial institution than the effects of general levels of inflation. Although interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services, increases in inflation generally have resulted in increased interest rates. In addition, inflation affects financial institutions' cost of goods and services purchased, the cost of salaries and benefits, occupancy expenses and similar items. Inflation and related increases in interest rates generally decrease the market value of investments and loans held and may adversely affect liquidity, earnings and stockholders' equity. Mortgage originations and refinancing tend to slow as interest rates increase and can reduce the Company's earnings from such activities and the income from the sale of residential mortgage loans on the secondary market. 19 Item 3. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures. ------------------------------------------------ The Company's President and its Vice President and Cashier have evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a-14(c)) as of a date within 90 days of the filing date of this quarterly report. Based on that evaluation, the President and the Vice President and Cashier have concluded that the Company's disclosure controls and procedures are effective to ensure that material information relating to the Company and the Company's consolidated subsidiaries is made known to such officers by others within these entities, particularly during the period this quarterly report was prepared, in order to allow timely decisions regarding required disclosure. (b) Changes in Internal Controls. There have not been any significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 23.1 Consent of Welch & Associates Exhibit 99.1* Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Reed D. Matney, the President of Volunteer Bancorp, Inc. on May 12, 2003. Exhibit 99.2* Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, signed by Greg Oliver, Vice President and Cashier of Volunteer Bancorp, Inc. on May 12, 2003. - ------------------ * A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. (b) There have been no Current Reports on Form 8-K filed during the quarter ended March 31, 2003. 20 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. VOLUNTEER BANCORP, INC. (Registrant) Date: May 12, 2003 /s/ Reed D. Matney ----------------------------------------- Reed D. Matney, President (principal executive officer) Date: May 12, 2003 /s/ Greg Oliver ----------------------------------------- Greg Oliver, Vice President and Cashier 21 Certification of President Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Reed D. Matney, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Volunteer Bancorp, Inc. ("Volunteer"); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of Volunteer as of, and for, the periods presented in this quarterly report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evalauation Date"); and c) presented in this quartelry report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not mateiral, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 12, 2003 /s/ Reed D. Matney ------------------------------ Reed D. Matney President 22 Cerfication of Vice President and Cashier Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Greg Oliver, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Volunteer Bancorp, Inc. ("Volunteer"); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of Volunteer as of, and for, the periods presented in this quarterly report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 12, 2003 /s/ Greg Oliver --------------------------- Greg Oliver Vice President and Cashier 23 EX-23 3 vbiex23_1.txt CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- As independent public accountants, we hereby consent to the use of our report, dated April 17, 2003, included in this Quarterly Report on form 10-QSB for the Quarter Ended March 31, 2003. /s/ Welch & Associates, Ltd. Welch & Associates, Ltd. Nashville, Tennessee May 12, 2003 EX-99 4 vbiex99_1.txt EXHIBIT 99.1 CERTIFICATION Exhibit 99.1 CERTIFICATION Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and in connection with the quarterly report on Form 10-QSB of Volunteer Bancorp, Inc. (the "Company") for the quarter ended March 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Reed D. Matney, the President of the Company, hereby certifies that (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This Certification is signed on May 12, 2003. /s/ Reed D. Matney ------------------------------------------------- Reed D. Matney President EX-99 5 vbiex99_2.txt EXHIBIT 99.2 CERTIFICATION Exhibit 99.2 CERTIFICATION Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and in connection with the quarterly report on Form 10-QSB of Volunteer Bancorp, Inc. (the "Company") for the quarter ended March 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Greg Oliver, the Vice President and Cashier of the Company, hereby certifies that (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This Certification is signed on May 12, 2003. /s/ Greg Oliver ---------------------------------------------------- Greg Oliver Vice President and Cashier -----END PRIVACY-ENHANCED MESSAGE-----